The Express Tribune reported that Iran has given Pakistan an offer that looks like it is too good to refuse. Tehran offered 100,000 barrels per day of crude supply to fuel starved Pakistan on a long term deferred payment.
Sources said that the Iranian government made the offer during the visit of the petroleum adviser Dr Asim Hussain to Tehran earlier this month.
According to sources, Iran had also offered to enhance supply if the two sides moved ahead on the proposed oil exports plan. The crude oil imported will be processed by Pakistani refineries.
US is already working to convince the Government of Pakistan to shelve the Iran-Pakistan gas pipeline project, designed to import 750 million cubic feet per day of gas from Iran to meet its domestic requirements. The recent Iranian offer may further anger the US and pressure may build upon Pakistan to refuse.
A senior government official said that “At present, Pakistan is facing problems in repayment of the International Monetary Fund Stand By Arrangement USD 7 billion loan and long term oil credit facility may ease pressure on foreign exchange reserves,” adding that however, Pakistan many not be able to materialize the offer due to payments issues.
Pakistan was importing 73 MW to meet the requirements of Gwadar in Balochistan but payment issues were hampering these imports.
Previously, Tehran supplied 45,000 barrels of crude oil to Pakistan on a three-month deferred payment plan until January 2011. However, the United Nations imposed sanctions halted imports due to difficulties in opening letters of credit from global banks. Since then, Iranian oil is largely smuggled into Pakistan. So, the payment issue may again halt the oil supplies if offer materializes.
An official said that Pakistan Refinery Limited was designed in 1962 to process Iranian oil. But consumption of Iranian oil in Pakistan is very low and therefore PRL has made modifications, adding that no refinery in Pakistan can process 100% Iranian crude oil. The oil pipeline between two countries may be feasible If Iran sets up a refinery in Pakistan.
Sources added that petroleum adviser Hussain had also discussed a plan of establishing a Iran sponsored refinery in Gwadar and laying an oil pipeline between two countries. Under the plan, an oil pipeline is to be laid right up to the Gwadar Port, where a crude oil refinery will be set up. Pakistan and Iran may enter into a JV partnership to set up the refinery.
Iranian oil had more component of furnace oil and Pakistan furnace oil requirement had increased from three to 4 million tonne in 2004-05 to 9 million tonne in the ongoing financial year. The production of furnace oil capacity of local refinery is up to 3.5 million tonne annually.
Currently, the Pakistan State Oil is a major importer of furnace oil to meet requirements of the power sector. Pakistan may also meet furnace requirements by importing crude oil from Iran, adding that Pakistan may save 20% per barrel as it will no longer have to bear the costs of transporting Iranian oil.